The British Pound (GBP) maintained marginal gains on Monday as the US markets remained closed for Labor Day. The UK market saw the release of the Manufacturing PMI, which came in line with expectations at 52.5 in August. With thin trading volumes due to the US holiday, the focus shifted to the US Dollar Index (DXY), which is recovering from a recent selloff. The upcoming PMI data and US Jobs reports will be crucial in determining the size of the interest rate cut by the US Federal Reserve (Fed) in September.
The S&P Global Manufacturing PMI for August remained unchanged at 52.5, reflecting steady growth in the UK manufacturing sector. The CME Fedwatch Tool indicates a 69.0% probability of a 25 basis points interest rate cut by the Fed in September, with markets pricing in a 25 basis points rate cut by the Bank of England in November. The US 10-year benchmark rate and the UK 10-year Gilt Benchmark remained stable on Monday, while European equities closed with minor losses.
GBP/USD Technical Analysis suggests that the British Pound is trading at high levels against the US Dollar, with the recent retracement providing opportunities for long positions. Traders are advised to identify support levels in order to target the year-to-date high near 1.3237 or higher. Key support levels include the upper band of the trend channel at 1.3120 and the 55-day Simple Moving Average at 1.2869, which could serve as strong support areas in case of a downside move.
Labor market conditions play a crucial role in economic health and currency valuation. High employment levels have positive implications for consumer spending and economic growth, which in turn boost the value of the local currency. Wage growth is a key consideration for policymakers, as it affects consumer spending and inflation levels. Central banks, including the US Federal Reserve and the European Central Bank, monitor labor market conditions closely as they directly impact economic growth and inflation.
In conclusion, the British Pound remains steady against the US Dollar amid thin trading volumes due to the US holiday. The upcoming PMI data and US Jobs report will be critical in determining the size of the interest rate cut by the Fed in September. Traders are advised to identify key support levels for potential long positions in GBP/USD, while labor market conditions continue to be a key driver for currency valuation and monetary policy decisions by central banks.
